Oil Prices Rise Iran Keyword Conflicts With Tuesday’s 0.93% Drop
U.S. crude futures fell 0.93% on Tuesday, extending losses as optimism about a possible end to the Iran war weighed on prices. Attacks on ships in the Strait of Hormuz and threats to energy infrastructure continued to put Middle Eastern supply at risk.
December WTI crude futures fell 0.93% on Tuesday, closing down $0.81 as optimism about a possible resolution to the US-Iran war weighed on prices.
Crude oil extended Monday’s losses and dropped to a 2.5-month low, while gasoline prices fell to an eight-month low. December RBOB gasoline futures settled down $0.0421, or 1.59%.
Markets are weighing hopes for renewed Middle Eastern energy supplies against continued attacks and threats to infrastructure. A rally in the dollar index to a 1.5-week high also pressured energy prices.
Diplomacy lifts hopes for supply
Prospects for a breakthrough in negotiations gained ground after last week’s US midterm elections. Qatar’s Foreign Ministry said Tuesday there had been “positive responses” from the United States and Iran to ongoing mediation efforts.
Any resolution could allow energy supplies from the Middle East to resume more fully. The prospect has helped drive crude lower, even as the conflict continues.
Iran has continued attacking ships transiting the Strait of Hormuz, while the United States has launched two limited strikes on Iran’s Qeshm Island since early last week.
Saudi Arabia’s East-West pipeline was also targeted Monday in the Medina region by Houthi rebels, leaving risks to regional energy infrastructure in focus.
Exports and production remain in focus
Oil is still leaving the region. Combined exports from Saudi Arabia, the United Arab Emirates, Iraq and Kuwait rose 10% to 15.53 million barrels per day in October, according to tanker-tracking data compiled.
Saudi Arabia reported that October crude production increased by 970,000 barrels per day to 9.2 million barrels per day, a 12% monthly gain. The recovery followed production falling to a 36-year low in August.
Higher Saudi output can add to supply, but production faces risks from Houthi missile attacks and threats to shipments near the Bab-al-Mandeb Strait.
Saudi state producer Aramco cut its December-delivery crude price for Asian buyers by $2 a barrel. The reduction was smaller than the $5 decrease markets had expected.
Other supply pressures
Attacks by Ukraine on Russian oil infrastructure have also curbed crude processing and exports. Ukraine has struck six of Russia’s 10 largest oil-processing plants in recent months.
Russian crude-processing rates averaged 3.51 million barrels per day in July, their lowest level in 24 years, according to EA Analytics. They rose to 3.98 million barrels per day in September as damaged refineries struggled to return online.
The International Energy Agency warned on September 11 that high prices and restricted supply would cause the biggest annual drop in global oil demand since the Covid-19 pandemic. It raised its estimate of this year’s global oil deficit to 1.7 million barrels per day from 1.3 million.
The agency said a global oil surplus would not return until 2027, later than its previous estimate of late 2026. OPEC+ agreed on November 1 to keep its December production quotas unchanged.
